Doyle’s compacts open door to casino expansions

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Doyle’s compacts open door to casino expansions

By Erik Gunn, for SBT

Baring court intervention, the new Indian gaming compacts negotiated last spring by Wisconsin Gov. James Doyle will spark a wildfire of casino gambling expansion across the state.
The compacts have given the tribes virtually unlimited expansion rights. And casino-operating tribes themselves have emerged as a political force in the state rivaling such well-established interests as the highway lobby, Wisconsin Manufacturers & Commerce (WMC) and the Wisconsin Education Association Council (WEAC).
All this in a state that once took such a firm stance against gambling that when companies ran national sweepstakes games you can find now with the most popular bingo promotions, they had to include the phrase “Void where prohibited by law” in deference to the Dairy State.
“Most people in their wildest dreams would never have expected this,” says Assembly Speaker John Gard, who’s suing the governor to block the new compacts. It is “the most breathtaking expansion of gambling in state history,” Gard said.
The door opened to Indian-run casinos in the early 1980s, when scattered tribes, asserting their sovereignty as independent nations, opened high-stakes bingo games in Michigan, California and Arizona.
According to, after federal authorities tried to shut them down, the U.S. Supreme Court ruled in 1987 that Indian tribes had a limited, but not absolute, right to run gambling operations on their lands. The 1988 Indian Gaming Regulatory Act set the rules by which states could regulate tribal gambling.
Gov. Tommy Thompson negotiated the first batch of gaming compacts with Wisconsin tribes starting in 1991, updating them in 1998, and Indian casinos or bingo halls sprang up in Green Bay, Milwaukee and Madison, as well as in smaller reservation communities such as Lac du Flambeau.
In 1999, over a veto from Mayor John Norquist, the Potawatomi bingo hall in Milwaukee was converted to a casino with the addition of blackjack tables and more slot machines to supplement the bingo games and slots already in place.
That same year gambling, expansion stalled in Wisconsin. Proposals to create Indian casinos in Kenosha and Johnson Creek foundered, despite substantial support and, in Kenosha, a narrow referendum victory. Online gaming sites like are also a good choice for those who are more comfortable playing at home.
A state audit last year found that gaming had netted tribes nearly $1 billion in net revenue — making gambling one of the biggest industries in the state.
Of the $210 Wisconsin residents spent per capita on gambling in 2000, $165 went to Indian-run casinos, dwarfing the money shelled out for PowerBall tickets or at non-Indian casinos in other states, according to The Federal Reserve Bank of Minneapolis, which last March published a wide-ranging profile of gambling in the upper Midwest.
Then, last winter, the state’s budget deficit and a new governor anxious to close the gap combined to open the doors to even more Indian gaming in Wisconsin.
Amendments negotiated by Doyle in secret with each of the state’s 11 tribes allowed provisions for bingo halls to be converted to casinos and existing casinos to extend their operations to 24 hours, seven days a week, in return for the state collecting a larger chunk of casino profits.
The agreements are estimated to be worth $200 million to the state over the 2003-’05 budget period.
The new amendments, however, also decisively shifted power to the tribes. Previous compacts explicitly allowed the state to unilaterally end tribal gaming. Language in the original 1992 compact for the Winnebago Tribe (now known as the Ho-Chunk Nation) was typical: While the compact could be automatically extended for a five-year term, the state or the tribe had the right to unilaterally cancel the agreement if either notified the other at least 180 days before the agreement expired.
The Doyle-negotiated 2003 amendments dramatically shifted the balance. The new language sustains the compact until “terminated by mutual consent of the parties” or until the tribe voluntarily revokes its gambling rights.
The state is thus stripped of any power to act on its own to curtail gambling in the future.
Gaming supporters counter that the new amendments permit either Wisconsin or the tribes to propose regulatory amendments every five years and broader amendments every 25 years. But nowhere do any of the amendments require the tribe to do anything more than “enter into good faith negotiations” and submit to binding arbitration of disputes.
In short, if the compacts stand up to court challenges, Wisconsin may look more and more like Las Vegas with snow.
Republican lawmakers have led the charge to undercut Doyle’s unilateral authority to negotiate the compacts, passing legislation that gave the legislature ratification power. When they were unable to override his veto, they sued, challenging the governor’s authority to negotiate the pacts unilaterally.
The case went straight to the Wisconsin Supreme Court, which will hear arguments early next year.
Cynics may debate whether GOP legislators were acting on principle, outraged by a surrender of the state’s leverage over tribal gaming – or whether they were merely vexed because the Democratic governor had managed to plug the deficit without raising taxes.
Gard dismisses the cynics’ claims.
“Every time people don’t want to talk about the merits, they want to talk about the personalities,” says Gard, who calls Doyle’s action “just a blatant, obvious violation of the constitution.”
Given the well-entrenched nature of the Indian gaming industry, the odds for the success of the suit might seem long. However, the legislators show every sign of pressing more than a token effort, hiring the well-regarded University of Wisconsin-Madison emeritus professor Gordon Baldwin to do the legal heavy lifting.
In the meantime, the tribes are lining up to cash in their chips.
Dane County voters will decide in two months whether or not they want to transform the Ho-Chunk nation’s DeJope Bingo Hall into the state’s 18th-full-fledged Indian gambling casino.
The Forest County Potawatomi are eyeing a major expansion of their Milwaukee bingo hall and casino. The Potawatomi would operate, for the first time, around the clock, with no limits on the number of slot machines. They also would add poker, craps and roulette to the existing blackjack tables.
Other tribes also eagerly seeking to expand gaming operations in every corner of the state: the Menominee still have their eyes on Kenosha, and other tribes are looking at Beloit, Shullsburg, and Hudson.
Besides converting the Madison hall to a casino, the Ho-Chunk have already put slots in more convenience stores on their lands scattered across northern Wisconsin.
In the upper Midwest, only Minnesota, with more than 20 casinos, exceeds Wisconsin’s current 17-casino count. The Badger state may yet claim the lead.
The tribes’ case for expanded gaming comes down to the dollars and cents of economic development. The original compacts created “35,000 jobs related to Indian gaming,” says Martin Schreiber, the influential lobbyist and former Wisconsin governor who represents the Forest County Potawatomi and the tribe’s casino operations in Carter, Wis., and in Milwaukee. “With the amendments, another 20,000 jobs would be generated.”
Schreiber rapidly ticks off a list of other accomplishments the Potawatomi’s casino revenues have produced.
“There are 1,500 people working at the casino with jobs that would not be working if it were not for Indian gaming,” he says.
The Potawatomi also provide a city-county allotment of 3% of the casino’s net take annually, $3 million in charity, $27 million to the Indian Community School in Milwaukee and a $300,000 subsidy the tribe makes to the poorer Red Cliff tribe.
Potawatomi money built a $10 million health center in Crandon, and together with the Mole Lake tribe, the Potawatomi bought out the proposed Crandon mine, ending a lengthy battle between industry and environmentalists over mining on the site.
The Ho-Chunk make similar claims for their accomplishment, with health clinics in Baraboo and Black River Falls built with casino profits, and donations to area law enforcement agencies and hospitals.
All told, the United Tribes of Wisconsin contend that more than 7,800 people work for Indian gaming operations in the state and that Indian casino counties have seen their median household incomes rise by anywhere from 27% to 45% in the last decade, compared with a state average of 14%.
Whether all of these benefits constitute substantive economic development is another question. William Thompson, a University of Nevada-Las Vegas professor who has examined gambling for more than a decade, says his own research on gaming-related economic development shows that, at best, it represents a transfer of wealth within the state.
“The casinos of Wisconsin have positive economic returns for their counties and local areas up to about 35 miles out,” says Thompson. “Those areas get an influx of money.”
Statewide, says the professor, who studied the issue for the Wisconsin Policy Research Institute in 1995, the costs and the returns from gaming were a wash. Thus, beyond a casino’s 35-mile radius, “it was a negative,” he says.
Referring to the Ho-Chunk Casino in Baraboo, he concluded: “The money goes from Madison to Baraboo, it doesn’t come back to Madison.”
Jobs alone don’t mean real economic development, says Earl Grinols, a University of Illinois economist who has studied the impact of gambling for more than a decade and who takes no funding from either advocates or critics of gambling.
Grinols concludes that gambling does more harm than good – yielding no net increase in business profits or tax collections, while driving up costs from crime, bankruptcy, social services and other ills.
All together, Grinols calculates, casinos cost $156 per adult more than the value of the benefits they provide.
To be sure, gaming has improved the economic standing of some Indians. The Minneapolis Fed, in a review of census data of 42 Indian reservations in its five-state area, found those with ample gambling revenues had a higher per-capita personal income — $20,442, compared with $9,691 on reservations with little or no casino revenue. (Per capita income for all residents in the fed’s district was $23,099.)
However, the calculation of the costs of gaming on society can be merky.
One researcher, Georgia State University economist Douglas Walker, whose work is financed by the gambling industry, contends bad debts, welfare costs and theft attributable to gambling shouldn’t be counted as “costs,” because they simply represent transfers of wealth, not actual costs to society.
Walker argues that the primary social cost of gambling is what it takes to arrest and try a gambler who commits a crime – and using that narrower definition, calculated gambling “costs” the state $2,974 per problem gambler, or $41 million a year in Wisconsin.
University of Illinois economist Grinols, however, says those calculations are just plain wrong. If a compulsive gambler steals $100 to feed his habit, that money is part of the cost gambling poses to the society – not just what it costs to jail the thief.
“Any normal person who is thinking about whether they want gambling in their society has to recognize that the non-gambling part of the population has to pay for the cost,” Grinols says.
Dane County District Attorney Brian Blanchard also rejects Walker’s findings, saying the legal expenses of prosecuting a gambling-related crime are only “the tip of the iceberg.”
Walker ignores the social costs — business and personal bankruptcies, broken marriages, shattered family ties — that can result even “when no clear crime is committed or bad checks written,” says Blanchard.
Still, there is another cost to reckon with: the price gaming is exacting on the state’s political soul. Big-money politics are a fact of life in Wisconsin today, and the gaming industry has only raised the stakes.
Wisconsin’s Indian tribes “are now on a very short list of interests pumping huge sums of money into campaigns,” says Mike McCabe, executive director of the Wisconsin Democracy Campaign, which monitors campaign financing and supports a system of publicly funded political campaigns.
Virtually all of the tribes’ political contributions have come as largely unregulated “soft” money, McCabe says. His group found that only $1,180 in direct contributions from Indian gambling interests went to the Doyle campaign from 1999 to 2002.
Instead, three tribes — the Ho-Chunk, the Potawatomi, and the Oneida — sent the Democratic National Committee (DNC) $725,000 in soft money contributions in October 2002. Between Oct. 25 and Nov. 4, 2002 — just days before the Wisconsin gubernatorial election, the DNC sent its Wisconsin affiliate $1.25 million to boost the party’s ticket, with Doyle at the top.
Additionally, the Potawatomi spent an estimated $250,000 for an independent “issue ad” that supported Doyle and disparaged his Republican opponent, Scott McCallum.
The $975,000 in soft money and issue ads spent by Indian gaming interests nearly doubled the $515,000 that the Wisconsin Education Association Council spent on issue ads and independent expenditures in last year’s governor’s race, according to WDC data.
“They’re pumping the kind of money into campaigns that WMC and the WEAC have pumped in, the Realtors and the road builders,” McCabe says of the tribes. “I don’t think it’s any coincidence that they have had considerable good fortune in advancing their agenda since they started actively supporting campaigns.”
Even as the tribes step into the big-money world of campaign financing, the compact negotiations themselves were kept secret.
“Other states don’t do that,” says William Thompson. “Wisconsin is an extreme.”
The culture of secrecy keeps the tribes’ financial data largely hidden from view. While state officials are permitted access, they can’t make it public — a provision that limited how much the Legislative Audit Bureau was able to tell taxpayers about its findings when it audited the tribal gaming operations last year.
Critics complain it also means the compacts themselves are something of a financial “black box,” leaving taxpayers unable to judge whether or not the state is getting a good deal.
William Thompson argues the secrecy violates Wisconsin’s tradition of open government as pioneered by the state’s Progressive icon, “Fighting Bob” LaFollette.
“Has Doyle heard of LaFollette?” the UNLV professor asks sarcastically. “This would be a kick in his face!”

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Dec. 12, 2003 Small Business Times, Milwaukee

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